Dubai's 'muted' office market leads to rental declines
Activity remains “muted” in Dubai’s office market, with a majority of districts in the city reporting flat or declining rents, according to Cluttons.
The firm’s Spring 2017 Dubai Office Market Bulletin reported declines in top-band rents in 15 out of 23 submarkets monitored, and increases in only two – DIFC, where top rents increased by 5.7 per cent year-on-year to Dh370 per square foot, and non-free zone space in Dubai Design District.
The submarkets which experienced the greatest declines were JLT (with a 22.2 per cent decline in top-band rents to Dh140 per sq ft), Garhoud (18.2 per cent, Dh90 per sq ft) and Al Barsha (18.2 per cent, Dh 90 per sq ft).
Lower-band rents dropped by 14.3 per cent both in JLT and Business Bay to Dh60 per sq ft, and were largely flat, declining in nine submarkets but increasing in four.
Faisal Durrani, the head of research at Cluttons, said that 2016 “was broadly punctuated by high levels of consolidation activity, notably from the oil and gas sector, but also existing occupiers looking at efficiencies through single-hub operations”.
However, he added that “a lot of that activity has all but subsided” and that government efforts to boost the technology, media and telecoms (TMT) sector were having an effect, with Internet City and Media City at the helm of a “rapidly expanding and ever-important” sector for Dubai’s economy.
“However, with limited amount of space available in high demand locations, interest is likely to rise in complementary free-zones such as Dubai Science Park. Samsung, for example, has recently trebled its floor space, while Amazon Web Services announced plans to establish a new Middle East office in the emirate as it works to grow its presence in the region.”
Space in Dubai International Financial Centre also remains at a premium, and with no substantial new stock due until ICD Brookfield Place completes in 2019, the shortage of available offices is “hampering activity”, according to the head of Cluttons’ Dubai office, Murray Strang.
“For now, core buildings command very low vacancy rates of sub 5 per cent and we expect this to persist,” he said.
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